Thousands of tenants are likely to face rent rises, after a report showing New Zealand houses are among the most expensive in the world.

The report has led to renewed accusations that the Government has done little to address the housing shortage, though Prime Minister John Key has defended his record on housing, saying price inflation was far worse under Labour.

The Organisation for Economic Co-operation and Development's paper ranked Kiwi houses the second-most expensive in the developed world, based on the ratio of price-to-income, and the most- overvalued relative to rents.

Labour has heralded the report as further proof of a housing crisis which it says is shutting young Kiwis out of the market, with the news for renters set to get worse.

New Zealand Property Investors Federation executive officer Andrew King said the report would prompt landlords to raise rents. "Rents are actually undervalued and should be higher."

The average rent, he said, was $350 a week - at least $40 below what it should be - and tenants should expect increases soon.

"We're trying to get them used to the idea . . . and hopefully they'll be a bit more planned and prepared for those rent increases when they do come."

Labour leader David Cunliffe said the report was proof of a housing crisis which the Government was failing to understand.

"The OECD is telling people what I guess we feel in our gut, but we now we've got the numbers to prove that New Zealand has the most unaffordable housing in the developed world."

Cunliffe also spoke about concerns over the impact of surging migration, with Treasury predicting a net inflow of about 40,000 people this year. Migration was "like a yo-yo" under National, he said.

Labour would look to cap net migration at about 20,000 a year, with the number of foreigners allowed in dependent on the number of Kiwis returning at the time.

"What we have to do is manage the new arrivals at a steady predictable level so that the total can be absorbed within our property market."

There was no point in having such levels that took up 80 per cent of all new homes in the Auckland market, he said.

But Key said the movements in migration were not new, saying they fluctuated wildly under the previous Labour government.

The most volatile part was the number of Kiwis leaving and that was plummeting as a result of the strong economy, he said.

More than half of all those coming in under the migrants category were skilled workers and helped fix skills shortages, such as in the trades that could help boost housing supply, he said.